Today’s post was written by Damani Davis, reference archivist at the National Archives in Washington, DC.
On March 3, 2015, the National Archives will commemorate the 150th anniversary of the Freedman’s Savings & Trust Company, better known as the “Freedman’s Bank.”
The founding of the Freedman’s Bank was spearheaded by John W. Alvord, a Congregationalist minister and abolitionist originally from New England, who served as a chaplain accompanying Gen.William Tecumseh Sherman’s troops during their march through Georgia. During his time in Georgia, Alvord observed the destitute conditions of the former slaves and also noted a pressing need for greater financial literacy and some type of savings bank to serve the black soldiers of the U.S. Colored Troops.
To address this need, Alvord later went to New York, where he met with philanthropists and leading businessmen to plan a “benevolent banking institution that would provide black soldiers with a secure place to save their money and at the same time encourage the values of thrift and industry in the newly freed African-American community.”[1] John W. Alvord and the founding trustees succeeded in getting a charter for incorporation approved by Congress and signed into law by President Abraham Lincoln on March 3, 1865. Ultimately, 37 branches of the Freedman’s Bank were established in 17 states and the District of Columbia. Although most of these branches were based in the states of the former Confederacy, there were also branches in northern cities such as New York and Philadelphia.
Initially, the Freedman’s Bank legitimately appears to have started off as a benevolent institution staffed by officials and trustees who were sincerely interested in promoting financial “upliftment” to the formerly enslaved population. It was intended to be a nonprofit savings bank with two-thirds of the deposits invested strictly in stocks, bonds, Treasury notes, and other securities of the United States. The remainder of the accumulated deposits was to be set aside to cover any eventual operational expenses. Members of the board of trustees were to receive no compensation, and no loans were to be made to any officials connected to the bank.
An 1870 amendment to the Freedman Bank’s charter removed some of the original restrictions prohibiting loans and speculative investments. At the same time, a significant number of the original founding trustees were no longer serving and had been replaced. These changes eventually led to mismanagement and corruption among some of the bank’s managing officials. These developments, together with a broader, national economic recession, resulted in the failure of the Freedman’s Bank.
The collapse of the Freedman’s Bank was a traumatic blow to the recently freed black population that was hoping to use their savings to purchase homes and land. During its operation, over 70,000 customers had opened accounts in the Freedman’s Bank with deposits totaling approximately $57 million. Although the Freedman’s Bank had officially received its charter from Congress, Congress had not established any Federal responsibility for the solvency of the institution.
Most of the African American depositors were not aware that the Freedman’s Bank was not an official agency or arm of the Federal Government. In their zeal to generate interest in the new financial institution and to appeal to prospective clients, John Alvord and many other early promoters had promoted the Freedman’s Bank as an official instrument of the Freedmen’s Bureau (which was a Federal Government institution ) and had proclaimed that the bank had the official sanction of Gen. Oliver Otis Howard and the late President Abraham Lincoln himself.
The founding promoters had declared to clients that the bank “was absolutely safe, being under the guarantee of Congress, and having the funds invested in United State securities, which were safe as long as the government should last, and that it was a benevolent scheme solely” for their benefit. Prospective clients were told that any profits “would be returned to the depositors as interest, or would be expended for Negro education.” [2]
As Reginald Washington, former archivist at National Archives put it, “The closure of Freedman’s Bank devastated the African American community. An idea that began as a well-meaning experiment in philanthropy had turned into an economic nightmare for tens of thousands African Americans who had entrusted their hard-earned money to the bank.” [3]
(National Archives,Records of the U.S. House of Representatives, RG 233)
The long-term ramifications of this trauma, particularly as it pertains to the subsequent economic history of African Americans, will be discussed at a symposium held at the National Archives for the 150th Anniversary Commemoration on March 3. The symposium will include a brief historical introduction to the Freedman’s Bank records, a moderated panel discussion consisting of former Ambassador Andrew Young, John Hope Bryant of Operation Hope, and Vanessa De Luca, editor-in-chief of Essence Magazine, and a post-event reception to be held in Rotunda.
[1] See, Reginald Washington “The Freedman’s Savings and Trust Company and African American Genealogical Research,” Prologue (Summer 1997, Vol. 29, no. 2).
[2] Walter L. Flemming, The Freedman’s Savings Bank: A Chapter in the Economic History of the Negro Race (1927), 45.
[3] Washington, “The Freedman’s Savings and Trust Company and African American Genealogical Research.”